I try to simulate a small open economy model with a housing sector. Firstly, I log-linearized the model solutions by hand and the corresponding code runs well. But now I want to do policy analysis so that I write all the solution equations in levels and typed in dynare, I also derived the state state by hand. The only difference is the price dispersion and Phillips Curve show up in the model in levels. But dynare always encounters error as
“One of the eigenvalues is close to 0/0 (the absolute value of numerator and denominator is smaller than 1e-06!
If you believe that the model has a unique solution you can try to reduce the value of qz_zero_threshold.”.

Here attached the code. Could you please help me take a look at the code and find the problem?

to see that your steady state file does not solve the steady state. Thus, there must be a mistake in either the equations or the steady state computation.

Thanks for your reply. Now I have fixed the problem. Dynare can run the code and get the result. But it cannot find the steady state when I use the command “model_diagnostics”. My understanding is that there is some mistakes in the “steady state model” block, but dynare can find the steady state itself. Am I right? If I am wrong, how dynare can get the results without a correct steady state?

The modified code is attached. Your help is highly appreciated! code.mod (9.87 KB)

Your steady_state_model-block is still incorrect. Resid says:

[code]Residuals of the static equations:

Equation number 1 : 0
Equation number 2 : 0
Equation number 3 : 0
Equation number 4 : 0
Equation number 5 : 1.4732
Equation number 6 : 0
Equation number 7 : 0
Equation number 8 : -0.28035
Equation number 9 : 0
Equation number 10 : 0.00084055
Equation number 11 : 28.0347
Equation number 12 : 0
Equation number 13 : 0
Equation number 14 : 0
Equation number 15 : 0.90871
Equation number 16 : 0.90909
Equation number 17 : -1.6698
Equation number 18 : 0
Equation number 19 : 0
Equation number 20 : 0
Equation number 21 : 0.90909
Equation number 22 : 0.90871
Equation number 23 : 0.90909
Equation number 24 : 0.90888
Equation number 25 : 0.90909
Equation number 26 : 0.90895
Equation number 27 : 0
Equation number 28 : 0
Equation number 29 : 0
Equation number 30 : 0.13292
Equation number 31 : 0
Equation number 32 : 0
Equation number 33 : 0
Equation number 34 : 0
Equation number 35 : 0
Equation number 36 : 0
Equation number 37 : 0
Equation number 38 : 0
Equation number 39 : 0
Equation number 40 : 0
Equation number 41 : 0[/code]

Please download the newest unstable version so that check; does not accept wrong steady states.

Many thanks for your reply. Do those non-zero residues represent the corresponding steady-state equations? If so, does it mean the corresponding steady-state equations are wrong?